If you think the role of “investor” is out of your reach, you are wrong. Being an investor does not necessarily require the presence of a silver spoon in your mouth from birth, a fancy graduate degree from a prestigious institution, or a day job that is decidedly white collar. Investing can take on many forms and a wide range of financial commitments, from modest sums to extreme amounts from high-wealth individuals.
Like many other things in life, being a successful investor can boil down to hustle and hard work. Even those born with the aforementioned-silver spoon can still screw up when investing. Likewise, history shows us plenty of rags to riches stories built upon smart investment decisions and hard work.
There are certain attributes typically shared by those who find success as individual investors; read on to learn what it takes and evaluate whether you already have the skill set or if it is one you can grow and nurture over time.
Characteristics of a Successful Investor
If you were to interview 100 different people who have achieved success with their investments, chances are they would exhibit most if not all of the traits outlined below.
Effective Decision-Making Skills
To succeed as an investor, you need strong decision-making skills, avoiding rash decisions based on emotion or made too hastily. But it also means not dragging your feet for too long when faced with an important decision to make.
Savvy and successful investors know how to assess the pros and cons effectively and make a sound decision on whether or not to move forward with an investment. “Feet draggers” will often miss out on promising investments as they miss the window of opportunity if they simply cannot make up their minds.
Effective investment decision-making also means knowing what voices to listen to and which ones to disregard or drown out. You want to look for some good investment mentors, people with a proven track record who are willing to offer an ear and lend their expertise to your investment decision-making process.
Your brother-in-law may be trying to convince you that investing in his CBD-infused dill pickle company is a sure thing, but it would be wise to seek the advice of someone outside of your family (with no “emotional” connection) before you invest in the company. In the same way we often “seek a second opinion” on medical matters, it is wise to do so on investments as well.
Good thing is that you don’t have to rely completely on your own judgement but get help from reputable analysts. A few sources worth checking out Best websites for stock research
Ability to Assess Risks
Risk assessment and an awareness of your own risk aversion are other important skillsets for successful investing.
We all know the mantra “high risk, high reward,” and there are many cases of investors and entrepreneurs who were willing to “risk it all” on an idea or product they believed in and eventually saw the risk pay off.
However, very few people are consistently batting 1000. Even the savviest investors make occasional mistakes, so you must set up your own parameters for risk. When investing in the stock market, a balance of high and low-risk investments in your portfolio ensures a better long-term result.
Your own risk assessment may not mirror that of a wealthier individual who has more of a “cushion” to absorb losses and mistakes. Consider what you can afford to lose before you invest.
Not all risks can be avoided of course. These risks are called undiversifiable risks. Should I diversify? A case against diversification
No matter how you invest, whether in the stocks, a hedge fund, mutual fund, real estate, or your brother-in-law’s dill pickle startup, you must stay on top of all the details to be successful, spot trends, find areas of weakness, and ensure you are putting your money in the right investment opportunity.
Property investments, in particular, may require a good deal of administrative time. If you have the means, you might consider delegating some of this work to others (such as hiring property managers).
Staying on top of the details means more profit in the long run. For example, the upkeep and maintenance of an investment property are critical to the long-term value. If you purchase a rental property and neglect it for years, you will find it harder to keep tenants or make a profit when you sell.
Willingness to Immerse in Study
Effective and successful investors will put in the time to learn when it counts the most.
Before you invest in a piece of property, a startup company, or anything else, you should take the time to study and make sure you are going in with your eyes wide open.
Most of us do not have money to burn by making mistakes borne of simply not doing the leg work. Laziness in this area, rushing to make decisions without all of the right background information, will come back to haunt you as an investor.
The amount of data available for real estate investing, for example, is astounding. Simple internet searches can yield a wealth of information to inform your decision about whether to be a real estate investor. If weighing whether or not to invest in your friend’s planned retail development, you can easily find traffic counts for the area, growth projections for housing, information on average incomes in the surrounding area, and more.
Finally, success in investing demands patience. For example, the real estate investment you make today might not truly “pay off” for a decade. Perhaps you buy a rental home in a neighborhood that is less desirable now but is changed by gentrification and ten years down the road becomes “the” place to live and work in your area.
Similarly, the stock market will have its ups and downs, and investors have to weather some storms to get to the eventual pot of gold at the end of the rainbow. If you are looking to get rich quickly by investing, chances are you will fail or be disappointed by timing (unless you have a crystal ball).
Investment payoffs generally take time, so be prepared to remain patient and know that the result will be worth it.